Market Outlook: LS election result, RBI interest rate decision key events to watch for this week

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New Delhi: Trading in the equity market will largely depend on two major events this week - general elections result and the RBI interest rate decision - analysts said, adding that the benchmark indices may rally on Monday on exit polls' prediction of a massive win for the BJP-led NDA and strong GDP data.

Exit polls on Saturday predicted that Prime Minister Narendra Modi will retain power for a third straight term, with the NDA expected to win a big majority in the polls. Counting of votes will take place on June 4.

"All eyes are now on the most significant event of the past five years — the outcome of the Lok Sabha elections, scheduled for Tuesday. Before that, market participants will react to the exit polls on Monday.

"The market is approaching the event with caution, and the positive surprise from exit polls can lead to a rally as majority of the exit polls are giving 350+ seats to the NDA. Conversely, a negative surprise from actual results might trigger a knee-jerk reaction in the market," said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Following the election outcome, the next major trigger will be the RBI policy announcement scheduled for June 7, he added.

"A key aspect to monitor will be the behaviour of foreign investors in the aftermath of the election results. On the global front, macroeconomic data from the US and China will also play a significant role in shaping market sentiments," Meena said.

Manufacturing and services PMI data for May are scheduled to be announced during the week.

"Exit polls results, which indicate clear victory for the NDA with around 360 seats completely removes the so-called election jitters which have been weighing on markets in May. This comes as a shot in the arm for the bulls who will trigger a big rally in the market on Monday," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

The bulls will be further emboldened by the better-than-expected 8.2 per cent growth in GDP numbers for FY24 which came after market hours on Friday, he added.

Along with exit polls, market will also react to domestic GDP data on Monday, Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said.

As per a report by Emkay Research, "Final outcome, if in line with exit polls, would likely calm investor nerves as political and policy continuity will be good for risk assets in the immediate run and macro stability in the medium term." Last week, the 30-share BSE Sensex tanked 1,449 points or 1.92 per cent while the NSE Nifty plunged 426.4 points or 1.85 per cent.

The BSE benchmark hit an all-time high of 76,009.68 on May 27. The Nifty also reached its lifetime peak of 23,110.80 on May 27.

Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said, "Historical trends from the previous two elections outcome in 2014 and 2019 have shown patterns, where the market closed with minimal changes after experiencing significant volatility during the early trading hours."